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Bill to Lift Ban on Domestic Crude Exports Advances in House

A bill that calls for lifting a ban on U.S. exports of most domestically-produced crude oil passed the House Subcommittee on Energy and Power on Thursday and will now advance to the full Energy and Commerce Committee for consideration.

During a hearing that lasted just over half an hour, HR 702 passed on a voice vote that appeared to run along partisan lines. There were no amendments.

The bill calls for repealing Section 103 of the Energy Policy and Conservation Act of 1975, which gives the president the authority to restrict oil and natural gas exports, as well as coal, petroleum products and petrochemical feedstocks.

Republican lawmakers -- many of whom represent states with significant oil-producing shale plays such as the Bakken, Eagle Ford and Permian Basin -- voiced strong support for the bill.

"America's energy landscape has certainly changed dramatically since 1975, when President Ford signed the export ban into law," Rep. Fred Upton (R-MI), chairman of the Energy and Commerce Committee, said during Thursday's hearing. "Few back then could have imagined that we would have a domestic oil glut jeopardizing new drilling and the jobs that go with it, but that's the situation that many experts say that we face today. The growing supply of American oil is outpacing domestic demand, and in fact needs a new outlet.”

Rep. Joe Barton (R-TX) said HR 702 was a bipartisan bill that enjoyed support from nearly 10% of the Democratic caucus.

"We are the only nation in the world that has the capability to substantially increase our oil production," Barton said, adding that oil-producing nations like Saudi Arabia, Russia, Iraq, Iran and Mexico are unable to do likewise. "But in order to do that we simply must repeal this outdated ban on crude oil exports."

Rep. Bill Flores (R-TX) concurred. "It is also notable that we're considering this bill today as debate on the Iran deal is moving forward," Flores said. "Why are some now so eager to lift Iranian sanctions to allow their oil to access the world market, yet our own domestic producers continue to face internal sanctions?"

But Democrats were unmoved. Rep. Frank Pallone Jr. (D-NJ) said he was concerned about the impacts HR 702 would have on consumers, U.S. refining capacity and climate change.

"Too often we eagerly embrace short-term profits and benefits without understanding the costs of our actions," Pallone said. "We should not make such a mistake again here. Instead we should take the long view to ensure we fully understand and consider the enduring consequences of our actions and choose the cleanest and most sustainable path forward."

Rep. Michael F. Doyle (D-PA) pointed out that West Texas Intermediate (WTI) crude oil prices were more than $100/bbl in the summer of 2014, but were less than $50/bbl today.

"Our committee cannot just be reactionary to oil prices," Doyle said. "We need to think about the big picture -- the next five, 10, 20 or 50 years. I think this bill can have some real negative consequences now and in the future."

Doyle added that in June, the most recent month with figures available, the U.S. used 16.9 million b/d of crude oil, but only produced 9.3 million b/d.

"Although we're very fortunate with these abundant resources, let's not forget that our country is still using much more oil than we're producing," Doyle said. "We're still a long way from energy independence when we have that kind of a spread."

Rep. Kathy Castor (D-FL) also made a point of a study released last May by the U.S. Energy Information Administration (EIA), which asserted that lifting the ban could result in $8.7 billion less in investment in U.S. refining capacity over the next 10 years. She also derided the bill's potential impact on national security.

"When it comes to national security, we have got to be very careful here because export of America's crude oil is rife with unknown and unintended consequences," Castor said. "Who will really benefit? It's likely the Chinese. We are currently locked in a geopolitical struggle with China...why would we help them gain a strategic foothold on America's natural resources?"

HR 702 also calls for the secretary of the U.S. Department of Energy to conduct a study "on the appropriate size, composition, and purpose of the Strategic Petroleum Reserve." The results would be presented to the House Energy and Committee, and the Senate Committee on Energy and Natural Resources.

Some refiners and environmental groups oppose lifting the ban, but for different reasons -- the former over concerns that oil prices could rise, and the latter that it could lead to more drilling.

In a note Thursday, analysts with ClearView Energy Partners LLC said HR 702 faces signi

HR 702 was introduced by Rep. Joe Barton (R-TX) last February and currently has 113 cosponsors. The subcommittee held a hearing on the measure on July 9.

In July, the Senate Energy and Natural Resources Committee passed a rival bill that also calls for lifting the ban on domestically-produced crude (see Daily GPIJuly 31). The bill, officially known as the Offshore Production and Energizing National Security, would allow the export of any domestically-produced crude oil or condensate to countries not subject to U.S. trade sanctions. Exports would not be allowed for crude oil stored in the Strategic Petroleum Reserve.

Last week, EIA analysts concluded that removing restrictions on U.S. crude oil exports would not cause domestic prices for petroleum products to skyrocket (see Shale DailySept. 2).

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